Legislature boosts small-business climate

The 2004 Kansas legislative session was a very good one for Kansas small businesses. Leadership in both chambers and both parties pushed small-business measures this year. In the end, the session was the most successful for small businesses since at least 1995.

- Franchise tax reductions

Franchise taxes were eliminated entirely for about 10,000 small businesses and reduced for another 21,000. Under current law, corporations and other limited liability entities pay franchise tax on the first $2.5 million of value of the corporation, but no tax for any value above that. The result is that small businesses pay more than 90 percent of the franchise tax collected.

Under the new franchise tax law, businesses with less than $100,000 in net worth will be exempt entirely from the tax. For businesses with net worth of more than $100,000, the tax rate is lowered from $2 to $1.25 per $1,000 but applies to the first $16 million of net worth. Although the tax is still regressive, the burden is more equally shared between big and small businesses.

- Repeal of custom software sales taxes

The custom software sales tax, enacted in 2002, was repealed entirely. For the most part, business professional services aren't subject to Kansas sales tax.

- Official delay of "destination sourcing"

The unofficial moratorium on the "destination-sourcing" provision of the Streamlined Sales Tax Project was made official until Jan. 1, 2005. The legislation passed in 2003 and became effective only weeks later. In addition to the moratorium, the new law gives the secretary of the Kansas Department of Revenue the authority, until July 1, 2005, to forgive interest and penalties for businesses that are struggling to convert.

- Increase in small claims court limit

Currently, the limit for actions in small claims court is $1,800. That limit will increase to $4,000. This will enable businesses to use the small claims court for redress of issues, especially collections issues, that are impractical to litigate because of the high costs of regular court cases.

- Health Savings Accounts

HSAs were passed by Congress in December, but Kansas law didn't allow them. HSAs have great potential to be a key health insurance solution for small businesses. The new Kansas legislation makes HSAs legal in Kansas.

- The Center for Entrepreneurship

Currently, assistance is highly fragmented for those seeking to start, expand or obtain financing for a small business. The Center for Entrepreneurship will provide a single "go-to" entity, including a toll-free number.

- Sales tax filings

Currently, any retailer that collects $1,600 or more in a calendar year must file monthly sales tax returns. The new law raises the amount to $3,200, allowing all businesses collecting less to report only quarterly. This will cut sales tax paperwork by two-thirds for thousands of small retailers.

Kenneth Daniel is chairman and CEO of Midway Wholesale and a freelance writer based in Topeka. He can be reached at [email protected].

Copyright 2004
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